STOCK MARKET WATCH, Tuesday January 26

Source: du

STOCK MARKET WATCH, Tuesday January 26, 2010

Bush Administration Officials Convicted = 2
Name(s): David Safavian, James Fondren

Bush Administration Officials Charged = 1
Name(s): Richard Lopez Razo

Financial Sector Officials Convicted since 1/20/09 = 11

AT THE CLOSING BELL ON January 25, 2010

Dow... 10,196.86 +23.88 (+0.23%)
Nasdaq... 2,210.80 +5.51 (+0.25%)
S&P 500... 1,096.78 +5.02 (+0.46%)
Gold future... 1,096 +6.70 (+0.62%)
10-Yr Bond... 3.63 +0.02 (+0.50%)
30-Year Bond 4.54 +0.01 (+0.29%)

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES..............................................S&P FUTURES

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie, Silver and US$

---

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---

This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.

Read more: du

Interest Rate Roulette
BY ROB KIRBY | JANUARY 25, 2010
According to the most recent data from the U.S. Office of the Comptroller of the Currency, the notional value of derivatives held by U.S. commercial banks increased $804 billion in the third quarter of 2009, or 0.4%, to $204.3 trillion.

Seven banks hold 99.8% of all derivatives:

see table (we know their names well here)

Derivative contracts remain concentrated in interest rate products, which comprise 84% of the $204.3 trillion total derivative notional values. ...

To further understand how 7 banks made more than 5 billion dollars in revenue trading interest rate derivatives in 3 months we must first understand the interest rate landscape. The yield curve for U.S. Government debt itself along with corporate spreads (how much of a premium a corporate pays for debt relative to the government) determine bank’s profitability in trading interest rate derivatives. ...

What the commercial banks are “earning,” it goes to reason that their counterparty is “losing”. This raises a serious question; who is on the losing side of the commercial bank’s interest rate swap trades?

http://www.financialsense.com/Market/wrapup.htm

I read the article,and he doesn't say! What a tease!

Good morning, Ozy! Now I don't feel so alone.

:donut: :donut: :donut:
Say, did you read the Market Observation? That must be the reason why my wallet has felt so light lately.

we'd all be dead of exsanguination by now.

This cannot go on for much longer. The imbalances are unsustainable and growing. The crash will be so destructive, our country will be obliterated, much like Detroit is.

I was expecting The Big One in California last week, just to completely push us over the edge. But maybe that's not the trigger. Maybe it will be a war. Though who would want to invade this country, or even bomb it, when we are doing such a good job all by ourselves?

The DC Delusion is strengthening. If Obama thinks a pretty SoU speech can save his Administration, he is more ignorant than even his biggest detractors think. The smell of desperation is becoming overwhelming every time an east wind blows. I'd say my optimism is at a new low, and it's been depressed since 1980. That's a long time.

It is happening here. Dekalb County is tearing down abandoned and foreclosed houses and putting community gardens in their places. Some positive developments do take place from the overheated real estate morass.

Remember when cornfields were developed to be shopping centers and McMansions?

:thumbsup:

That is good news. :D

Report: Al-Qaeda aims to hit U.S. with WMDs
Huge attack is top strategic goal, not ‘empty rhetoric,’ ex-CIA official says

All that oil money can buy almost anything except a nuke. (until North Korea starts production in earnest)

Davos security chief found dead: reports

SAN FRANCISCO (MarketWatch) -- Markus Reinhardt, the police commander in charge of security at the World Economic Forum in Davos, Switzerland, was found dead in his hotel room from an apparent suicide, according to media reports Tuesday. Further details of the death were unavailabl

Link: http://www.marketwatch.com/story/davos-security-chief-found-dead-reports-2010-01-26

not a good start

09:00 Case-Shiller 20-city Index Nov
Briefing.com -4.60%
Consensus -5.00%
Prior -7.28%

10:00 Consumer Confidence Jan
Briefing.com 52.1
Consensus 53.5
Prior 53.3

10:00 FHFA Home Price Index Nov
Briefing.com 0.3%
Consensus 0.2%
Prior 0.6%

http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

KUALA LUMPUR, Malaysia – Oil prices slid to near $74 a barrel Tuesday in Asia, weighed by weak regional stock markets and a stronger dollar. ...

Concerns over China's recent moves to control bank lending clouded Asian stock markets, which were mostly down Tuesday.

The prospect of slowing growth in China has raised risk aversion in equity markets and pushed investors to buy the dollar, seen as a safe haven, said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. ...

In other Nymex trading in February contracts, heating oil eased 1.84 cents to $1.947 a gallon while gasoline lost 1.78 cents to $1.983 a gallon. Natural gas futures fell 8.1 cents to $5.64 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

(Not much of a move. Debt seems to jump up big then drop slowly maybe up a little and down a little for days--repeat. Sooo busy. Good day all.)

= Held by the Public + Intragovernmental(FICA)
= 7,783,157,721,690.45 + 4,519,307,766,226.89
DOWN 70,049,877.74 + UP 2,372,289,750.39

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.72, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 10 seconds we net gain another American, so at the end of the workday of the report, there should be 308,539,038 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $39,873.29.
A family of three owes $119,619.86. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 31 days.
The average for the last 21 reports is 9,875,851,938.49.
The average for the last 30 days would be 6,913,096,356.94.
The average for the last 31 days would be 6,690,093,248.65.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 77 reports in 114 days of FY2010 averaging 5.10B$ per report, 3.44B$/day.
Above line should be okay

PROJECTION:
There are 1,094 days remaining in this Obama 1st term.
By that time the debt could be between 13.8 and 19.6T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
01/22/2010 12,302,465,487,917.34 BHO (UP 1,675,588,439,004.26 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,392,636,484,405.60 ------------* * * * * * * * * BHO
Endof10 +1,257,125,586,035.48 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
12/31/2009 +083,831,281,729.66 ------------**********
01/04/2010 -007,102,898,314.32 -- Mon
01/05/2010 +000,354,346,864.84 ------------********
01/06/2010 +000,123,816,367.19 ------------********
01/07/2010 -022,790,950,811.50 -
01/08/2010 -000,177,723,158.27 ---
01/11/2010 -000,226,209,166.36 --- Mon
01/12/2010 +000,163,748,521.92 ------------********
01/13/2010 -000,144,326,167.15 ---
01/14/2010 -025,105,278,682.17 -
01/15/2010 +057,080,501,160.91 ------------**********
01/19/2010 -000,292,818,574.91 --- Tue
01/20/2010 +001,498,198,188.82 ------------*********
01/21/2010 -031,161,420,148.11 -
01/22/2010 -000,070,049,877.74 ----

55,980,217,932.81 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4241459&mesg_id=4241492

(Not much of a move. Debt seems to jump up big then drop slowly maybe up a little and down a little for days--repeat. Good day all.)

= Held by the Public + Intragovernmental(FICA)
= 7,783,116,255,564.44 + 4,520,620,231,004.01
DOWN 41,466,126.01 + UP 1,312,464,777.12

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.72, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 10 seconds we net gain another American, so at the end of the workday of the report, there should be 308,564,958 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $39,874.06.
A family of three owes $119,622.17. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 20 reports in the last 30 to 32 days.
The average for the last 20 reports is 10,123,193,380.47.
The average for the last 30 days would be 6,748,795,586.98.
The average for the last 32 days would be 6,326,995,862.79.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 78 reports in 117 days of FY2010 averaging 5.05B$ per report, 3.37B$/day.
Above line should be okay

PROJECTION:
There are 1,091 days remaining in this Obama 1st term.
By that time the debt could be between 13.8 and 19.2T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
01/25/2010 12,303,736,486,568.45 BHO (UP 1,676,859,437,655.37 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,393,907,483,056.70 ------------* * * * * * * * * BHO
Endof10 +1,228,856,677,911.93 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
01/04/2010 -007,102,898,314.32 -- Mon
01/05/2010 +000,354,346,864.84 ------------********
01/06/2010 +000,123,816,367.19 ------------********
01/07/2010 -022,790,950,811.50 -
01/08/2010 -000,177,723,158.27 ---
01/11/2010 -000,226,209,166.36 --- Mon
01/12/2010 +000,163,748,521.92 ------------********
01/13/2010 -000,144,326,167.15 ---
01/14/2010 -025,105,278,682.17 -
01/15/2010 +057,080,501,160.91 ------------**********
01/19/2010 -000,292,818,574.91 --- Tue
01/20/2010 +001,498,198,188.82 ------------*********
01/21/2010 -031,161,420,148.11 -
01/22/2010 -000,070,049,877.74 ----
01/25/2010 -000,041,466,126.01 ---- Mon

-27,892,529,922.86 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4242843&mesg_id=4242854

Reuters) - Stock index futures pointed to a lower opening on Wall Street on Wednesday, following declines in Asia after China implemented an increase in higher reserve requirements for some lenders.

China

At 0940 GMT (4:40 a.m. EST), futures for the Dow Jones, S&P 500 and Nasdaq were down between 0.2 and 0.5 percent.

The FTSEurofirst 300 index of leading European shares was down 0.5 percent at 1,013.95 points, with banks taking most off the index. The index is on course to register its fifth straight day of declines.

Quarterly results from Johnson & Johnson will show whether the diversified health care company's line of prescription drugs is rebounding from an earlier sales slump caused by generic competition for branded drugs that have lost patent protection.


-more-

http://www.reuters.com/article/idUSTRE6030ZW20100126

SHANGHAI (Reuters) - Fears of more Chinese policy tightening spooked global markets on Tuesday after Beijing ordered some banks to comply immediately with a planned increase in reserves and a report suggested earlier attempts at curbing lending had failed.

The developments prompted concern that the central bank would get more aggressive about reining in credit to fend off inflation and asset bubbles, potentially dragging on growth in the world's third-largest economy.

China implemented a planned increase in required reserves for some banks on Tuesday, sources said, sparking heavy selling of Asian stocks that underscored how sensitive global investors are becoming to Beijing's tightening of monetary policy.

Qu Hongbin, chief China economist with HSBC in Hong Kong, said five major banks had suggested they had received instructions from authorities last week to slow new lending, but not stop it.

"We continue to expect more quantitative tightening measures to cool new lending in the coming months," Qu wrote in a note to clients, adding that he expects a rate increase as early as the second quarter.

"That said, we do not believe that Beijing will slam the brakes on credit growth this year, not least because Beijing also has other more effective policy tools to deal with rising overheating risk -- slowing down the pace of new infrastructure projects," he said.

China has been one of the main drivers of the global economic recovery in the absence of a strong rebound in the West and investors fear a slowdown there would stunt its demand for commodities and other imported goods.

The punitive increase in the amount of reserves some banks have to set aside, which was ordered last week, also came after a newspaper report said China's efforts to curb bank lending were meeting with mixed success, fueling fears that policymakers may take tougher action soon.

/... http://finance.yahoo.com/news/China-tightening-worries-rb-3862514256.html?x=0&.v=1

Edit: Amazing! Here's a scribe who knows the difference between reigning and reining.

Wow. Next we'll hear that the Marshall was martial after all.

WASHINGTON – Facing voter anger over mounting budget deficits, President Barack Obama will ask Congress to freeze spending for some domestic programs for three years beginning in 2011, administration officials said Monday. Separately, Obama unveiled plans to help a middle class "under assault" pay its bills, save for retirement and care for kids and aging parents.

The spending freeze would apply to a relatively small portion of the federal budget, affecting a $477 billion pot of money available for domestic agencies whose budgets are approved by Congress each year. Some of those agencies could get increases, others would have to face cuts; such programs got an almost 10 percent increase this year. The federal budget total was $3.5 trillion. ...

The Pentagon, veterans programs, foreign aid and the Homeland Security Department would be exempt from the freeze. ...

The plans Obama set forth came from the yearlong work of a task force, led by Vice President Joe Biden, that was charged with helping the middle class.

http://news.yahoo.com/s/ap/20100126/ap_on_bi_ge/us_obama_jobs

---

Herbert Hoover would be so proud. This will do exactly the opposite of what he intended with the middle class task force. Secondly, the Pentagon -the Pentagon- would be exempt from the freeze? WTF? The first place anyone should look to cut wasteful spending and opaque accounting is this place. Look at the wars that continue to be waged and the attributable expense. The United States is currently bogged down in Iraq fighting the remnants of a previously fourth rate military power. Look at Afghanistan. Same scenario there and that country was not even in the top ten in terms of military power. Such waste.

I'm done editorializing about this. I am sure much more capable wordsmiths have thundered on this subject.

It's the Ponzi Recovery

From Economist's View:

Posted by Tom Bozzo


More at link....

He's a real quick study, that one.

Atrios provides the lead-in:

Not entirely against, if it serves some purpose. But I doubt it does.

Then he links to this piece by Yglesias:


ozy here: I know what Atrios (a.k.a. Duncan Black) is getting at. Cuts like the ones proposed would definitely anger his liberal base. I would also anger the fiscally conservative people who voted for Obama in '08 - except for the spiteful ones who like poking people not like them in the eye.

One might think that with the heat this is generating someone at the White House would buy a clue and bury this rotten fish.

and he wouldn't even need to change his car insurance to Geico.

He'll say Obama is repeating the same mistake FDR made in 1937. Government spending was easing the Great Depression, but FDR listened to Republican critics who complained about deficits. In trying to deal with the deficit prematurely, he triggered another recession.

I still think it's a bit early to make a final judgment on Obama's presidency. However, I think he missed the opportunity to get a lot more done. His lack of impatience and endless good temper allowed delaying tactics by the opposition to build into seemingly insurmountable obstacles. FDR famously introduced a phenomenal amount of activity in his first 100 days. Obama squandered much of his "honeymoon" period, giving his opposition time to find arguments that work. He'll be lucky to get anything new pushed through. He's looking ineffective. In politics, that could be worse than bad policy.

Sadly, if Obama fails, the Republicans will claim that vindicates all the terrible policies of George W. Bush, and they'll give us more and worse. Imagine a President Palin. The horror, the horror.

or implementing a stock-trade tax.

THANKS JOE! Thanks for NOTHING...

Is that really what we are angry about? I don't think so. Dana ; )

But what do they know?

:sarcasm:

http://www.cbsnews.com/stories/2002/01/29/eveningnews/main325985.shtml

LOS ANGELES, Jan. 29, 2002

http://market-ticker.denninger.net/archives/1893-Weekend-Roundup-123.html

...Kennedy's former Senate seat - in a state that is so blue that you'd swear everyone is choking to death when you cross the state line, went to a Republican. A thirty-point swing in the polls in literally less than a month away from Democrats. Despite what the pundits have said this was not simply about health care. It was about general disaffection with where the country has gone and is headed.

(I DON'T KNOW WHY PEOPLE KEEP INSISTING THAT MASSACHUSETTS IS A LIBERAL STATE--IT IS NOTHING OF THE KIND. IT IS PROVINCIAL, ELITIST, AND GENERALLY IGNORANT IN THE WAY ONLY THE SELF-ABSORBED CAN BE)


Since March of last year the banks and stock market generally have rallied hard. But.....

The economy has not in fact improved. There are millions more out of work today than there were in March of 2009. There is scant little improvement in freight traffic. Sales tax and income tax numbers are below where they were last year at this time. This, of course, makes perfect sense - the unemployed pay few taxes.

The plates have been kept in the air only due to two things: (1) People not paying their mortgages for literally a year or more (and thus spending that money generally) and (2) massive transfer payments amounts to $500 billion a year from the government to the people - money that they borrowed, not taxed and collected.

You'd think with people not paying their mortgages the banks would be losing enormous amounts of money and all go under. The big banks haven't, but only because in March they got permission to lie about their "asset quality." This is a short-term game and relies on the cash flow being sufficient to (temporarily) cover up the truth. But the asset quality deterioration continues and the truly ugly reality isn't even found in the first mortgages - it is in the fact that all the home equity lines out there behind an underwater first mortgage that defaults are worth zero. These loans are concentrated in the "big banks" - and yet they are all carrying this paper at values assuming they'll be able to collect it. Best of luck boys.

In other words, the stock market rally has been about not improving economic prospects but rather utter BS, lies and scams. Let's look at some basic statistics:

* 15 stocks in the S&P 500 have a P/E over 100. 23 have a P/E over 60. 37 have a P/E over 40. 65 have a P/E over 30 and 152 have a P/E over 20. 220 - nearly half - have a P/E over 13, the historical long-term average. The latter statistic is trotted out from time to time to claim that the market as a whole isn't overvalued, but 125 stocks in the S&P 500 have a negative P/E - that is one quarter of the S&P 500 has negative earnings.

* In the NDX (Nasdaq 100) believe it or not there are 13 stocks with a P/E over 40. But 39 have a P/E over 20 and 21, or 21%, have negative earnings.

People say we should ignore the past and focus on "predicted" earnings. But how accurate is that? Did those predictions correctly foretell the plunge in 2008 and early 2009? Nope. So why would you use them today, when they have a proven record of being wrong?

So how in the hell has the market rallied to the degree it has? Simple: The market is a read of "fear and greed", and as such as people perceived that thievery and scamming would continue to be profitable the market has reflected that expectation in price.

But things are changing. It has been reported that Wall Street bonuses will total some $145 billion. That's 1% of GDP - and is absolutely obscene. The people have figured out that this is really nothing more than Wall Street firms sucking the blood of the citizens, and while it would be ridiculous in a good year where everyone is flush with lots of spendable income coming on the back of a year where millions of Americans have lost their jobs, taxes are going up, cities and states are going bankrupt and the economy has been and is for crap it is the sort of thing that stirs thoughts of boiled rope, lampposts and resurrection of the guillotine among citizens.

The Senate went so far as to demand that the citizens bare their necks once again by filibustering a vote to end TARP immediately.

Democratic leadership opposed the amendment because they felt it would have handcuffed Treasury Secretary Timothy Geithner in his efforts to ensure the stability of the financial markets.

In other words, to make sure those $145 billion in bonuses could be paid - out of your pocket.

Of course this was just the last piece of idiocy. Fannie and Freddie had their losses transfered "in entirety" to the taxpayer on Christmas Eve - after the market closed and while nobody (they hoped) was watching.

The loss of the Massachusetts Senate seat may have rocked the foundation though. It sure led to President Obama deciding to roll out Paul Volcker and a proposal to end proprietary trading by banks - an abusive practice that has certainly played a big part of "heads I win ($145 billion), tails the taxpayer loses."

Is it enough? Hell no. Nor does it go to the core of the problem.

I know I keep hammering on this but its important - we cannot have a sound economy when the "earnings power" of Wall Street is entirely focused on stealing a kid's candy and sucking your blood - literally. Yet that's what it's been.

The entire premise of Wall Street (and banks generally) is to "expand credit." You hear it from Obama and you heard it from Reid yesterday in his begrudging "I might vote for Bernanke" claim:

Reid said that Bernanke "must redouble his efforts to ensure families can access the credit they need to buy or keep their home, send their children to college or start a small business."

There's the statement of the problem right "in your face."

Credit, folks, is just a fancy form of the old Wimpy character in the Popeye Cartoons: "I would gladly pay you Tuesday for a hamburger today."

The reason the market collapsed in the fall of 2008 and spring of 2009 is that the eating of hamburgers exceeded the ability to pay for them Tuesday.

This should not have happened and indeed it is Bernanke's job to guarantee that it does not, as mandated in The Federal Reserve Act (Title 12, Chapter 3, Sub1, Sec225a:)

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

In other words The Federal Reserve does not set interest rates. It is charged under the law with controlling credit growth such that all the hamburgers you eat today can be paid for Tuesday, on balance, so that production and thus the economy grows at a sustainable rate.

When The Fed violates this prescription, as it has for the last 30 years, you set the stage for a credit boom - and subsequent bust.

Yet to get the boom (and then bust) you need more.

See, unbridled credit growth isn't really under The Fed's control, at least not in the main. Sure, The Fed can irresponsibly grow credit aggregates entirely within the government sphere where there is no private market activity to stop it, but in the private markets this is not possible all on its own. That is, The Fed can stop the expansion of credit but it can't start the expansion; it has the ability only to place a cap on credit growth but not a floor.

Why?

Because in order to irresponsibly expand credit - that is, to grant credit to more and more people in larger and larger amounts, beyond that which is justified by actual economic expansion, someone has to get screwed.

That's an inescapable fact - growth of credit that is supportable by output is both reasonable and sound. Growth of credit beyond that rate can only occur if some of the people it is granted to can't pay. Given full disclosure of the quality of said credit it is unmarketable.

If you were to mandate that all lenders had to hold their loans on their balance sheets then lenders would be very unlikely to make an unsound loan, as they would have to eat it.

But securitization (and trading generally) of credit obligations (that is, debt instruments of all sorts) is not necessarily bad. Indeed, a debt (for the creditor) is an asset to the person who made the loan, so why shouldn't he or she be able to sell it like any other asset - a house, a car, a boat, a backhoe or a combine?

We recognize in the law that the sale of a car with known-bad brakes to someone without disclosing that fact is an act of fraud. It is illegal to do that, just as it is illegal to sell a car and intentionally lie about the number of miles it has been driven (by, for example, rolling back the odometer.) Such an act in business is widely recognized as fraudulent and exposes the person who does it to both civil lawsuits and criminal penalties.

This is where the fundamental disconnect between Wall Street (and the stock market over the last nine months) and reality on Main Street lies.

We have done nothing to dissuade fraud and lies in the credit markets - quite the contrary. We have further enabled those lies, and that is why the stock market has "recovered."

The dive during this last week - some 500 pts on the DOW and nearly 60 handles on the S&P - was not due to Mr. Brown's win, nor Obama's rant against the banks.

Rather, it happened because market participants are sensing a crack in the government's ability (but certainly not desire!) to keep the fraud going, to keep the lies from being exposed, and to keep the losses hidden where nobody can see or act on them.

That the truth will eventually come out, and the pyramid scheme that has "enabled" this unbridled credit growth to occur will ultimately collapse, is a certainty. We saw a piece of it in 2008 and 2009, but only a piece. By aborting the market's ability to price in that fraud and accurately represent earnings capacity as a function of actual economic activity as opposed to scams, obfuscation and lies we have done even more damage to our economic future.

President Obama owns all of that additional damage, as it all - every bit of it - happened on his watch. The possible embedding of $500 billion in structural deficits is a part of this - money we don't have and ultimately will not be able to borrow. The pressure from Geithner, Obama's employee, to demand "mark to fantasy" accounting, allowing banks to hold HELOCs and other loans at values assuming payment where such is very unlikely to occur. The pressure, temporarily sated, from the Wall Street banksters to take "just another drink" from your jugular vein, much like the vampires in Daybreakers, while those on the street are blithely unaware that in the "harvesting lab" all of their sources of blood are literally dying off.

There are many pundits who say that the sell-off this week was an "over-reaction" in that the big banks will find a way around Obama's plans, even if he manages to get them through Congress.

They're probably right on the latter, but like most who focus only on the immediate they're missing the forest for the trees.

Today's valuations in the market can only be sustained if you believe that credit can be expanded from today's approximately $53 trillion (total system-wide) to about $95 trillion over the next ten years. To believe this you must believe that either (1) there is more payment capacity for interest and principal in the economy than is being used - a preposterous notion when the entire collapse began due to people being unable to pay their debts or (2) that we can grow GDP by an average of 7% annually over the entire next decade without fail.

The last five decades of history says that #2 is flatly impossible.

If neither #1 or #2 can happen then what you saw this week is a warning, just as you saw warnings in the summer of 2006 and the early months of 2007. A sell-off triggered by a fleeting recognition that the values being expressed in the credit and stock markets do not reflect forward earnings capacity but rather the fact that Wimpy indeed cannot pay for his next hamburger come Tuesday.

We are only left to argue about when the market has night terrors of recognition and acts accordingly - not if.

http://news.yahoo.com/s/ap/20100126/ap_on_bi_ge/us_obama_budget

The Senate is likely to reject a White House-backed plan to establish a bipartisan task force to recommend steps to curb the deficit, even as lawmakers digest the news that President Barack Obama wants a three-year freeze in the domestic budgets they control.

Fresh numbers arriving Tuesday morning from the Congressional Budget Office are expected to bring continued bad news on the deficit, keeping the pressure on Obama and congressional Democrats to demonstrate they're serious about taking on the flood of red ink.

The spending freeze, expected to be proposed by Obama during the State of the Union address on Wednesday, would apply to a relatively small portion of the federal budget, affecting a $477 billion pot of money available for domestic agencies whose budgets are approved by Congress each year. Some of those agencies could get increases, others would have to face cuts; such programs got an almost 10 percent increase this year. The federal budget total was $3.5 trillion.

The freeze on so-called discretionary programs would have only a modest impact on a deficit expected to match last year's $1.4 trillion. The steps needed to really tackle the deficit include tax increases and curbs on benefit programs like Medicare, Medicaid and Social Security.

That's the idea driving the Obama-backed plan to create a special task force to come up with a plan to curb the spiraling budget deficit. But the Senate sponsors of the plan say it's attracted too much opposition from the right and left to prevail.

Republicans say the panel — it would try to develop a deficit reduction blueprint after the November elections for a vote before the new Congress convenes — would lead to big tax hikes. Democratic opponents say they don't want to vote on proposals to cut benefit programs like Social Security without being able to shape the plan.

Obama's three-year spending freeze will be part of the budget Obama will submit Feb. 1, senior administration officials said, commenting on condition of anonymity to reveal unpublished details.

It's likely to confront opposition on Capitol Hill, where a handful of powerful lawmakers write 12 annual appropriations bills. They've gotten used to hefty increases but now are being asked to tighten their belts. House Appropriations Committee Chairman David Obey, D-Wis., declined to comment, his spokesman said.

The Pentagon, veterans programs, foreign aid and the Homeland Security Department would be exempt from the freeze.

The savings would be small at first, perhaps $10 billion to $15 billion, one official said. But over the coming decade, savings would add up to $250 billion.

The White House is under considerable pressure to cut deficits — the red ink hit a record $1.4 trillion this year — or at least keep them from growing. Encouraged by last week's Massachusetts Senate victory, Republicans are hitting hard on the issue, and polls show voters increasingly concerned.


THEY BETTER, THAT'S ALL I CAN SAY

About this peasant who was tired of being cold, so he bought a big shiny stove. That stove is too big, his neighbors said, but he scoffed. And he chopped wood and lit a big fire in his new stove, but the stove drew in too much outside air through the leaky walls of the hut to burn that big fire, and the hut was colder than ever. So the peasant burnt up all his firewood, then all the furnishings, and finally the walls, trying to make the stove work right. What he really needed was good insulation, and a stove that had its own air source so that it didn't draw cold air into the space he was trying to heat.

He didn't understand the mechanism for heating a space.

Similarly, none of these idiots in finance and politics understand the principles of creating wealth. They only know how to steal it, and how to burn it up. They count zeros, not lives. As a result, they are literally killing people at home and abroad, and Obama is complicit, up to his neck.

http://news.yahoo.com/s/ap/20100126/ap_on_bi_ge/us_bernanke_senate

Bolstered by a White House lobbying effort that included the president, Federal Reserve Chairman Ben Bernanke's chances at a second four-year term improved Monday, calming a stock market that had grown anxious over the uncertainty of his support.

President Barack Obama championed Bernanke in an interview on Monday as his aides worked the phones to ensure the Fed chairman is confirmed by the Senate.

"He has my strongest support. I think he's done a good job," Obama told ABC News.

"What we need is somebody at the Federal Reserve who can make sure that the progress that we've made in stabilizing the economy continues. I think Bernanke is the best person for that job," the president said.

With Bernanke's term expiring Sunday, Senate Majority Leader Harry Reid, D-Nev., expects a confirmation vote by the end of the week, his spokesman said. David Axelrod, a top White House adviser, said Bernanke has the votes to keep his job.

Bernanke's brightening prospects provided the White House with a rare bit of good news amid political upheaval caused by simmering public anger over the economy, joblessness and bank bailouts.

The Federal Reserve, with its power to set interest rates that influence economic activity, employment and inflation, wields extraordinary influence over the lives of millions of Americans. It also plays a crucial role as the country's lender of last resort when banks can't get their money elsewhere.

Bernanke still can count on several "no" votes when the Senate takes up his confirmation. But after a surge of opposition late last week, and with many senators still undecided, the tide appeared to be turning in his favor. Amid the news, the Dow Jones industrial average rose 24 points after losing 552 points over the previous trading days.

Sen. Dick Durbin of Illinois, the second-ranking Democratic leader in the Senate and the party's top vote counter, conceded many Democrats are apprehensive. But after meeting with Bernanke Monday in the Capitol, Durbin said the Fed chairman should win a second term with help from Republican senators.

Complicating Bernanke's reappointment is his need for 60 votes to overcome a procedural hold on Bernanke's confirmation placed by Sen. Bernie Sanders, a Vermont independent who has been one of his leading critics.

But Durbin said even senators who might oppose the Fed chairman have said they would not attempt to block his confirmation from reaching the Senate floor. Among them are Democrats Patrick Leahy of Vermont and Sheldon Whitehouse of Rhode Island.

"I don't like filibusters on nominations," Leahy said.

Durbin said Bernanke in their meeting acknowledged "mistakes were made" before the financial crisis. But Durbin said Bernanke also noted that problems that created the crisis predated his government service.

"Putting all this at his doorstep may be going too far," Durbin said.

A review of public statements and a survey of Senate offices Monday showed more than 30 senators supported Bernanke. Fifteen had announced their opposition.

Democratic Sen. Max Baucus of Montana, chairman of the Senate Finance Committee, was among several senators who began falling in line behind Bernanke's confirmation on Monday. "Facing circumstances not seen since the Great Depression, he made a number of critical decisions that brought us back from the brink of economic disaster," Baucus said.

For better or worse, Bernanke has come to embody both the run-up and the response to the financial crisis that peaked in the fall of 2008. Critics blame him for not recognizing trouble signs and for being part of a massive bank bailout; advocates credit him for launching aggressive countermeasures that prevented a financial collapse.

Even as momentum seemed to be shifting in Bernanke's favor, Sen. John McCain, R-Ariz., formally announced his opposition to the Fed chairman. The liberal MoveOn.org activist group called on senators to vote against Bernanke in an e-mail to its membership.

"He must be held accountable for many of the decisions that contributed to our financial meltdown," McCain said in a statement.

The market's reaction last week to news that senators were lining up against Bernanke was a strong indication that Bernanke's defeat would rattle Wall Street and financial markets around the world and add new risks to the fledgling recovery. Economists fear that prolonged political wrangling over a successor could increase the odds of the economy faltering and dipping back down into recession.

Bernanke's term expires Jan. 31, and turmoil over his reappointment comes as he and his Fed colleagues begin a two-day meeting Tuesday to gauge the strength of the economic recovery and weigh efforts to wean banks from emergency lending programs.

The Fed is all but certain to keep its key bank lending rate — it affects a wide range of rates on consumer loans — at a record low near zero when the meeting concludes on Wednesday.

It is also expected to renew a pledge to hold rates at record lows for an "extended period" to nurture the recovery. Economists think that means rates will stay where they are for at least six more months.

You have to wonder what these guys do on their lunch hour, what mix of drugs and balderdash they imbibe, how they can write such fairy tales....


Nope, they still don't have a clue, de Nile is in full flood, and there's no end in sight, despite the warning of 3 special elections so far. What's it gonna take? Full insurrection?

By Kevin Connor

The same lobbyist that sold Washington on Enron is now touting Ben Bernanke. According to Politico, former Enron lobbyist Linda Robertson has been managing Bernanke’s confirmation effort on behalf of the Federal Reserve — coaching him through the process in much the same way she coached Ken Lay and Jeff Skilling through the Washington influence game.

Robertson played a key role in some of Enron’s most scandalous moments in the year prior to its collapse. For starters, she was at the center of negotiations involving the highly secretive energy task force headed by Vice President Dick Cheney. A review of Enron email shows that Robertson guided Lay through pivotal meetings with Cheney and other officials, and actually authored the Enron memo and talking points that were later integrated into Cheney’s controversial energy plan. ....

Enron was one of the companies that got special attention from Cheney, and Robertson authored the plan that Enron sent to Cheney. She first sent the energy plan talking points to Lay chief of staff Steven Kean and chief lobbyist Richard Shapiro on April 5, 2001 (unfortunately, I can’t find a link — it’s pulled from the database available here):

The attached Talking Points are for Ken’s use in his conversations and/or meetings with Bush Administration officials on their National Energy Plan. We are awaiting word on a possible meeting today with Josh Bolton at 4:30. We have confirmed a meeting Friday at 3:45 with Larry Lindsey. Thanks

....

A House Oversight investigation later obtained these documents and found that the Bush White House plan had adopted “all or significant portions of Enron’s recommendations” in seven of the eight areas outlined in Robertson’s document. Most of the recommendations involved federal intervention that deregulated the country’s power markets.

---

Let's start with what we know:
• Robertson is a Clinton administration Treasury re-tread.
• She sold Enron's vision of unfettered energy markets to the Cheney administration.
• Bernanke's nomination to the Federal Reserve chair was Cheney's idea.
• Bernanke is now Robertson's client.

QED

The leaks continue apace:

The day after Vice Chairman Kohn testified before Congress, it started dawning on the FRBNY that they weren’t going to be able to keep the names of counterparties from Congress.

FRBNY staff member James Bergin e-mailed several other FRBNY staff:

Fascinating stuff . . .

---

More can be found at Ritholtz's blog about the steady flow of AIG-related e-mails.

This is the big problem and question.

The people who orchestrated this bailout see public funds as their discretionary slush fund. Use of their own personal property means they do not have to tell anyone how it is being used and for what.

That's a problem.

So let's bring on the indictments!

http://www.ft.com/cms/s/0/f558a84c-0996-11df-b91f-00144feabdc0.html

Full-year profits at DP World, one of the world’s largest container terminal operators, are set to fall after it handled 8 per cent fewer containers in 2009 than in 2008....Worldwide container handling by all operators fell 12 per cent, DP World said.

http://www.ft.com/cms/s/0/a43b34c2-09c6-11df-b91f-00144feabdc0.html

General Motors moved closer to an initial public offering on Monday as it appointed its third chief executive in less than a year and preparing to shed $6.7bn in debt left over from last year’s government-sponsored bankruptcy.

Ed Whitacre, the 68-year-old interim chief executive, was given the job on a permanent basis and will work on improving the fortunes of the biggest US carmaker and steering it through a difficult IPO.

The former head of AT&T, the telecoms company, succeeds Fritz Henderson, who was ousted from his post two months ago after less than a year at the helm of GM, which is majority-owned by the US government.

“We were not involved in that decision (to appoint Mr Whitacre),” said Ron Bloom, the Obama administration official who managed the government rescue and controlled bankruptcies of GM and Chrylser last year. “We certainly wish Mr Whitacre well in this very challenging endeavour he’s taken on.”

Besides announcing his appointment, Mr Whitacre said that GM would finish repaying the $6.7bn of US loans and $1.4bn in Canadian and Ontario government loans by June, well ahead of their scheduled repayment date of July 2015. It made an initial $1.2bn payment to the US Treasury in December.

Mr Bloom said the government had already received $470m in interest payments from GM and said the company was robust enough to repay the remainder of the $6.7bn US loan. “The faster the taxpayers can get their debt securities repaid . . . the better for the Treasury and the taxpayer,” he said. “Number two, we do not think this in any way endangers GM.”

Mr Whitacre said the next milestone would be the public share offering, but declined to commit to any time period; the earliest expectation for an IPO is the end of this year. Mr Bloom stressed that the government planned on a “staged exit” and would not sell its entire 60.8 per cent stake in one go.

“This place needs some stability, I guess that’s me,” said Mr Whitacre on Monday. He emerged from retirement to become GM’s chairman in the wake of the carmaker’s court-supervised restructuring before becoming interim chief executive after Mr Henderson’s removal.

“You sort of get pulled in,” he added. “I was both honoured and pleased to accept this role. So I’m going to do it for a while.”

GM was considering candidates from both inside and outside the company. Mr Henderson, who replaced Rick Wagoner as chief executive last year, was himself an internal candidate.

Belying his easygoing manner and Texas drawl, Mr Whitacre has a reputation as a naturally curious but forceful manager accustomed to getting his own way. He told senior GM managers after arriving in Detroit that he had never worked as a non-executive chairman, and wondered how good he would be in that role.

John Dingell, the Democratic congressman from GM’s home state of Michigan, welcomed Mr Whitacre’s appointment and applauded the early loan repayment. “This is a remarkable achievement, especially considering the state of GM’s balance sheet just a year ago,” he said.

YEAH, JOHN, REMARKABLE. WHY DON'T YOU RETIRE BEFORE IT ALL BLOWS UP, AGAIN?

http://www.ft.com/cms/s/0/b451e770-09a8-11df-b91f-00144feabdc0.html

International alarm over Greece’s debt crisis abated on Monday when investors flocked to buy the government’s first bond issue of the year, an indication that it may run into less trouble than anticipated in meeting its short-term financing needs.

Investors placed about €20bn ($28bn, £17bn) in orders for the five-year, fixed-rate bond, four times more than the government had reckoned on. However, in a sign that Greece is being made to pay for years of fiscal profligacy, the bond carried a record high interest rate spread relative to the rate for German bonds, the eurozone’s benchmark.

Greece is under heavy pressure from its 15 eurozone partners to restore discipline to its public finances after it disclosed last year that it had massively understated its budget deficits, partly because of political interference with the national statistical service.

Greece needs about €53bn to fund its debt requirements this year, a task that may prove harder than raising last year’s sum of more than €60bn if, as some investors suspect, global financing conditions tighten in the course of 2010.

The Greek stock market responded positively on Monday to the bond offering, rising 2.8 per cent, and 10-year Greek bond yields, which have an inverse relationship with prices, fell 8 basis points to 6.16 per cent.

A broader calming effect was visible on the markets, as yield spreads narrowed between German bonds and those of eurozone countries such as Ireland and Italy which, like Greece, are perceived as being under fiscal strain.

European Union officials and diplomats describe the Greek programme to tackle its deficit as a long overdue step in the right direction. Yet other eurozone governments are still determined to send the message to financial markets that Greece will have to solve its problems on its own, through rigorous controls on public spending and more efficient tax collection, rather than rely on possible emergency support from Germany and others.

In the eyes of political leaders and central bankers in other European capitals, the credibility of the euro in their own countries risks being damaged if markets become convinced that Greece will be rescued without making an effort at putting its house in order.

The European Commission is preparing an opinion on a three-year economic programme that Greece’s socialist government drew up this month with the aim of slashing the budget deficit to 2.8 per cent of gross domestic product in 2012 from an estimated 12.7 per cent last year.

After reviewing the Commission’s assessment, EU finance ministers will give their verdict on Greece’s plans at a meeting in Brussels on February 16. But some said the targets were so ambitious as to be unattainable without putting severe pressure on Greek living standards. This in turn would test the political courage and willpower of the government, they said.

The government in Athens has told the Commission that it expects its public debt to hit a peak of 120.6 per cent of GDP next year before easing to 113 per cent in 2013. But some EU officials and independent economists regard these forecasts as too optimistic.

Classroom is calling.

:hi:

http://www.ft.com/cms/s/0/da14dad8-0928-11df-ba88-00144feabdc0.html

The Obama administration’s proposed bank levy is threatening the $3,800bn repurchase market, an obscure but fundamental source of funding for financial groups and the US Treasury, executives and analysts have warned.

The potential impact of the $90bn, 10-year levy on the repo market could also complicate Federal Reserve efforts to drain the huge amounts of liquidity it injected into the financial system during the crisis.

Banks use the repo market, where securities such as US Treasuries are used as collateral in exchange for loans, for short-term funding. But they also provide funding for investors wanting to buy the securities, earning a profit on the difference between the interest rate at which they borrow and the one at which they lend.

Wall Street executives say the proposed levy, which would charge banks a 15 basis point fee on their liabilities minus insured deposits, will prompt them to reduce repo exposure to cut short-term liabilities.

They say the profit they make on repo contracts – about five basis points – would be wiped out by the levy, making repo transactions loss making.

“It is a serious issue for financial markets,” Colm Kelleher, Morgan Stanley’s finance chief, said.

“ will have to look at secured funding markets unless they want to close them down.”

Jamie Dimon, chief executive of JPMorgan Chase, one of the biggest operators in repos, has voiced concerns at the effect of the proposed fee on that market.

Brad Hintz, an analyst at Bernstein Research, estimated in a recent note to clients that banks could reduce their levy’s bill by about 10 per cent if they scaled back their involvement in the repo market.

But other analysts say a reduction in banks’ involvement in the repo market could be consistent with the levy’s aim of reducing financial groups’ reliance on short-term funding.

A reduction in repo activity could create problems for the US Treasury, which uses the market as an important conduit to sell bonds used to fund its deficit.

“Most of the repo market is associated with Treasury financing and this will make the market function less efficiently,” said Dominic Konstam, head of interest rate strategy at Credit Suisse.

The Fed has also tested “reverse repos” – selling assets such as Treasuries to bankers for cash, with an agreement to buy them back later at a slightly higher price – as part of its exit strategy from the stimulus provided during the crisis.

Some analysts believe the negative effect of the levy on repo might lead the authorities to exclude that market when details of the plan are finalised.

The levy on bank liabilities is part of a package of proposed regulation announced over the past fortnight by the government. Last week, Barack Obama proposed new limits on banks’ size and riskier operations.

Tue Jan 26, 2010 12:17pm GMT LONDON (Reuters) - Britain only just crept out of an 18-month recession at the end of 2009, suggesting any monetary tightening remains a long way off and raising fears about the prospects for recovery ahead of an election due by June.

The Office for National Statistics said on Tuesday gross domestic product rose by 0.1 percent between October and December, well below analysts' forecasts for growth of 0.4 percent and lower than all the predictions in a Reuters poll.

For 2009 as a whole, the economy shrank by 4.8 percent -- the worst yearly performance since records began in 1949.

/... http://uk.reuters.com/article/idUKTRE60O4N420100126


FTSE falls for 5th session, led down by miners
Tue Jan 26, 2010 12:26pm GMT
Email |Print | Reprints LONDON, Jan 26 (Reuters) - Britain's top share index fell 0.5 percent by midday on Tuesday, led down by weak miners tracking lower metals prices, and with banks pressured after final UK fourth-quarter GDP data failed to match expectations.

By 1212 GMT, the FTSE 100 index .FTSE was off 27.28 points, or 0.5 percent, at 5,233.03, looking to take its losing streak into a fifth straight session -- something not seen since Feb. 2009. The index dropped 0.8 percent on Monday.

The benchmark British index is down 3.4 percent this year after gaining 22 percent in 2009.

/... http://uk.reuters.com/article/idUKLDE60P0VW20100126


Europe stocks sag for 5th day as banks sink again
Tue Jan 26, 2010 12:50pm GMT PARIS, Jan 26 (Reuters) - European stocks sank for a fifth day in a row on Tuesday, extending the market's worst sell-off in six months, with banks taking a beating and miners retreating along with metals on worries over tightening in China.

Investors were also rattled by data showing Britain crept out of recession in the fourth quarter of 2009 but only just and with a far weaker growth rate than expected.

Britain's Office for National Statistics said on Tuesday gross domestic product rose by 0.1 percent between October and December, well below analysts' forecasts for growth of 0.4 percent after an 18-month recession which wiped out 6.0 percent of output.

At 1244 GMT, the FTSEurofirst 300 index of top European shares was down 0.35 percent at 1,015.10 points, after dropping to as low as 1,008.01, a level not seen since Dec 11.

Europe's benchmark index, which gained 26 percent in 2009, is now down 3.1 percent this year.

...

Banking stocks, which were among the top gainers in 2009, have been sharply falling since the White House shocked the market with a plan to curb risk-taking by financial firms.

Banks were by far the biggest losers on Tuesday, with UniCredit (CRDI.MI: Quote, Profile, Research) down 3.5 percent, UBS (UBSN.VX: Quote, Profile, Research) down 2.1 percent, Deutsche Bank (DBKGn.DE: Quote, Profile, Research) down 2 percent and Credit Agricole (CAGR.PA: Quote, Profile, Research) down 1.8 percent.

The DJ STOXX bank index has tumbled 12 percent over the past two weeks.

/... http://uk.reuters.com/article/idUKLDE60P14020100126

When I was very young and heard the story about the Big Stove, I didn't understand it. That's because we don't heat our houses with wood. I just assumed that if you had a wood stove, you would be warmer than if you didn't.

But then came Carter, and the Energy Crisis, and I was in New Hampshire, where people decided that instead of going broke heating with Saudi oil or freezing to death, they would convert to wood-burning stoves using local wood supplies. And suddenly, wood burning science and technology boomed.

Now, there are pellet stoves that burn one kernel of corn or one pellet of wood at a time (heat your home with a couple of bushels a year!) and houses with total R values in the 50's, insulation options galore; green jobs, people, we're talking green environmentally and green in money. Windows, doors, everything got more energy efficient.

Well, GE couldn't stand that, plus the photovoltaics and low flow hydro and turbines were literally taking the wind out of nuclear and big coal-fired electricity plants, so Reagan was put into office and he shut everything down. He even pulled the solar collectors off the White House, a petty, stupid action if ever there was one.

Well, like that poor Russian peasant, Bernanke thinks that a big shiny financial system will produce plenty of heat (in this case, money). But he doesn't understand the first thing about generating same, storing it, and not losing it through the cracks. He has instead burned everything available (all our savings for years to come) and destroyed our forests (manufacturing). And it's still cold, and getting colder.

If I were Bernanke and Obama and all the financiers, I'd worry about frozen Americans bringing back the auto da fe.

http://quotes.ino.com/chart/?acs=NYBOT_DX&v=i

Last trade 78.478 Change +0.288 (+0.37%)

USD Graphic Rewind

http://www.dailyfx.com/forex/fundamental/article/usd_graphic_rewind/2010-01-26-0648-USD_Graphic_Rewind.html



...more...

US Dollar, Japanese Yen Gain on Risk Aversion as China Hikes Reserve Ratios

http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2010-01-26-0500-US_Dollar__Japanese_Yen_Gain.html

Key Overnight Developments

• US Dollar, Japanese Yen Surge as China Hikes Bank Reserve Ratios
• Bank of Japan Keeps Policy Unchanged, Trims Deflation Forecast

Critical Levels



The Euro sank as much as 0.4% while the British Pound lost 0.2% against the US Dollar as risk aversion intensified in Asian trading, boosting the safety-correlated greenback (see below). We remain short EURUSD at 1.4881.

Asia Session Highlights



The US Dollar and Japanese Yen raced higher as Asian shares and US stock index futures tumbled after Reuters reported that the China’s central bank will require China Citic Bank Corp and the Industrial and Commercial Bank of China to raise their reserve ratios by an additional 0.5% effective today. The move follows a series of recent actions taken by Chinese authorities to rein in lending on fears that the buoyant may overheat, particularly after stronger than expected growth and inflation figures released last week.

The Bank of Japan unanimously decided to keep benchmark interest rates as well as monthly government bond purchases unchanged at 0.10% and 1.8 trillion yen, respectively. Governor Maasaki Shirakawa and company said the economy was “picking up” and trimmed their deflation expectations, saying CPI will fall 0.5% and 0.8% in the 2010 and 2011 fiscal years versus prior forecasts calling for 0.8% and 0.4% declines. However, policymakers cautioned that there is not sufficient momentum for a sustainable recovery and promised to stick with an “extremely accommodative” financial environment, identifying beating deflation as a “critical challenge” for monetary policy.

...more...

Economic growth 'cannot continue' (to prevent global climate change)
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4242912
linked story at http://news.bbc.co.uk/2/hi/science/nature/8478770.stm
It's been up almost two hours and has just four responses.

I'm not one of them - I'm too down this AM over the state of the world. Read Demeter's post above - " If It Were Real Blood These Vampires Drank" and it about sums up my take on things. The real "big one" in California is noted in an article over at Commondreams by Lakoff:

http://www.commondreams.org/view/2010/01/25-0



CA may be a little ahead of the nation as a whole there - I never remember specific numbers so don't remember what the recent figures are on that, but I don't think they're that far off.

Of course, yesterday I was told that "Commondreams" was a useless rag full of haters, or some such, I don't remember.

So now Obama wants a freeze. Still courting those big bad scary Rs, I guess, and they're soggy minions festooned with teabags.

But hey, the markets the markets....what will the markets do? The markets like "growth" I do believe - as long as it is "growth" in that share of the wealth owned by the upper 1% and the fools in the upper 5% get to skim a little off to keep them in their place, collecting for the Oligarchs.

1/25/10 Computer-driven trading raises meltdown fears
By Jeremy Grant in London

An explosion in trading propelled by computers is raising fears that trading platforms could be knocked out by rogue trades triggered by systems running out of control.
Trading in equities and derivatives is being driven increasingly by mathematical algorithms used in computer programs. They allow trading to take place automatically in response to market data and news, deciding when and how much to trade similar to the autopilot function in aircraft.

Analysts estimate that up to 60 per cent of trading in equity markets is driven in this way.

Concerns have been highlighted by news that NYSE Euronext, the transatlantic exchange operator, has fined Credit Suisse proprietary trading arm for the first time for failing to control its trading algorithms. In the Credit Suisse case, its system bombarded the NYSE’s systems with hundreds of thousands of “erroneous messages” in 2007, slowing down trading in 975 shares.

The case was far from isolated, say traders. CME Group, the Chicago-based futures exchange, is investigating a case this month where a trader in “mini” S&P Index futures contracts “inadvertently traded approximately 200,000 contracts as both buyer and seller”.

Last year, the London Stock Exchange suffered a three-hour outage after its trading system collapsed under the strain of a huge volume of orders. Some traders blamed the spike in volumes from algorithmic trading.

Frederic Ponzo, managing partner at GreySpark Partners, a consultancy, said: “It is absolutely possible to bring an exchange to breaking point by having an ‘algo’ entering into a loop so that by sending them at such a rate the exchange can’t cope.”

Regulators say it is unclear who is monitoring traders to ensure they do not take undue risks with their algorithms.

The Securities and Exchange Commission has proposed new rules that would require brokers to establish procedures to prevent erroneous orders.

Mark van Vugt, global head of sales at RTS Realtime Systems, a trading technology company, said: “If a position is blowing up so fast without the exchange or clearing firm able to react or reverse positions, the firm itself could be in danger as well.”

http://www.ft.com/cms/s/0/84950872-09e5-11df-8b23-00144feabdc0.html?nclick_check=1


Edit: If the link won't let you read the article, go to Google and search on the title. Google will let you read the full article.

They're nothing but numbers, formulae, and there oughta be a geek somewhere who can figure out a "new" one and plug it into some brokerage and explode the whole stupid mess, like Mr. Creosote.



Tansy Gold, who was never good at math but had some really really REALLY bad math teachers, except for Mr. Brownell and he was terrific!

1/25/10 An Insider's View of the Real Estate Train Wreck
By David Galland, The Casey Report

The first time I spoke with real estate entrepreneur Andy Miller was in late 2007, when I asked him to serve on the faculty of a Casey Research Summit. As John Mauldin, a former faculty member himself, knows, we're very selective with our speakers. And there was no one in the nation I wanted more than Andy to address the critical topic of real estate.

My interest in Andy was due to the fact that he has been singularly successful in pretty much all aspects of the real estate market, including financing and developing large projects – such as shopping centers, apartment communities, office buildings, and warehouses – from one end of the country to the other. His expertise has also allowed him to build an impressive business providing assistance to large financial institutions that need help in dealing with problem commercial real estate loans. As you might suspect, business is booming.

Back in 2007, however, what most intrigued me about Andy was that he had been almost alone among his peer group in foreseeing the coming end of the real estate bubble, and in liquidating essentially all of his considerable portfolio of projects near the top. There are people that think they know what's going on, and those who actually know – Andy very much belongs in the latter category.

In fact, he initially refused to speak at our event, only agreeing very reluctantly after I had hounded him for several months. The reason for his refusal, I later found out, was that he had spoken at several industry events before the real estate collapse and had been all but booed off the stage for his dire outlook.

The happy ending of this story is that Andy's speech at our Summit was a rousing success, and he enjoyed it so much that he has now spoken at several, and has kindly agreed to sit for periodic interviews to keep our readers up to date on the latest developments in this critical sector. So far, Andy's real estate forecasts continue to come true.

As you'll read in the following excerpt from my latest interview with Andy, who now spends considerable time each day helping the nation's biggest banks cope with growing stacks of problem loans, he remains deeply concerned about the outlook for real estate.


Some snippets from the interview...


GALLAND: No one has been more right on the housing market in recent years. So, what's coming next? Some of the housing numbers in the last few months look a little less ugly. Could housing be getting ready to get well?

MILLER: I don't think so.
For all intents and purposes, the United States home mortgage market has been nationalized without anybody noticing. Last September, reportedly over 95% of all new loans for single-family homes in the U.S. were made with federal assistance, either through Fannie Mae and the implied guarantee, or Freddie Mac, or through the FHA.
The public doesn't have any idea of the scale of the guarantees the government is taking on through Fannie, Freddie, and FHA. It's huge. If people understood what the federal government has done and subjected the taxpayers to, there would be a public outrage. But you can't get people to focus on it, and it's very esoteric, it's very hard to understand. But it's not something the bond market won't notice. The government can't keep doing what it has been doing to support mortgage lending without pushing interest rates way up.

GALLAND: So what about commercial real estate?

MILLER: When I saw what was happening in the housing market, I liquidated all my multifamily apartments, shopping centers, and office buildings. I liquidated all my loan portfolios, and I'm happy I did.
Then it occurred to me in 2005 and 2006 that the commercial world had to follow suit. Why? Because it's a normal progression. Obviously, when single-family homes decline in value, multifamily apartments decline in value. And when consumers hit the wall with spending and debt, that's going to have an impact on retailers that pay for commercial space.

GALLAND: So here we are, we've got the federal government again, through its agencies and the FDIC, ready to support the commercial real estate market. They've taken one step, in allowing banks to use a very loose standard for loss reserves. What else can they do?

MILLER: Well, obviously nobody knows, but I can guess at what's coming by extrapolating from what the federal government has already done. I believe that the Treasury and the Federal Reserve now see that commercial real estate is a huge problem.
I think they're going to contrive something to help assist commercial real estate so that it doesn't hurt the banks that lent on commercial real estate. It'll resemble what they did with housing.

GALLAND: Do you think the U.S. will come out of this crisis? I mean, do you think the country, the institutions, the government, or the banking sector are going to look anything like they do today when this thing is over?

MILLER: I know this is going to make you laugh, but I'm actually an optimist about this. I'm not optimistic about the short run, and I'm not optimistic about the severity of the problem, but I'm totally optimistic as it relates to the United States of America.
This is a very resilient place. We have very resilient people. There is nothing like the American spirit. There is nothing like American ingenuity anywhere on Planet Earth, and while I certainly believe that we are headed for a catastrophe and a crisis, I also believe that ultimately we are going to come out better.

Full interview...
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2010/01/25/an-insider-s-view-of-the-real-estate-train-wreck2.aspx

Excellent article, try to take time to read it all!

Not to mention, our American trained businessmen have no equal. We are really forked over by them both, especially the twofers.

Just ask the Sioux.

That is exactly the interpretation of the First Amendment that our Supreme Court made.

You know, extending that thinking, all bribery laws should be invalidated.

Up she goes, down she goes...a lot of storm and fury signifying nothing.